Beer brewer Heineken is edging closer to acquiring Asia Pacific Breweries as the company’s first half profits disappointed on Wednesday, but an analyst warns that it could get tougher for the industry as takeovers reach a saturation point.
“The acquisitions pace will definitely slow down, by definition there are not so many players anymore,” Spiros Malandrakis, alcoholic drinks analyst from Euromonitor, told CNBC Wednesday.
“That’s why (Asia Pacific Breweries) is so important as well, it’s probably one of the last relatively major targets out there.”
Reports on Wednesday show that Heineken is getting closer to controlling APB, a Singapore based brewer and the maker of Tiger beer. Heineken’s direct stake has risen to 12.18 percent after buying shares from Singapore state investor Temasek Holdings, amongst others.
Heineken are in negotiations with conglomerate Fraser and Neave in order to buy a much larger stake and have full control of APB . Heineken CEO Jean-Francois van Boxmeer gave CNBC an expected time-scale for the completion of this deal.
“It will be at least forty-five days. What we must try to do is complete the deal before the December 15,” he said.
The firm reported earnings on Wednesday that failed to match expectations. Earnings rose 4.3 percent year-on year, before interest and tax, but currency effects and acquisitions are thought to have improved this figure. Organic earnings actually fell 0.5 percent.
CEO van Boxmeer was quick to reassure shareholders that the acquisitions won’t stop and they are looking to boost their growth even more in Asia, Africa and Latin America.
“What we always pursue, as a strategic aim, is to pick up markets which are still underdeveloped,” he said.
“The four big brewers have over half of the total beer market in the world. Obviously consolidation is a never ending story, we have seen very, very large deals but I suppose there will be further consolidation ahead of us.”
Van Boxmeer explained that they still have a very good market share in Europe and are considered to be the market leader.
Analyst Spiros Malandrakis told CNBC that the industry were eager to find new markets, away from Europe, to improve business.
“We have massive maturity issues in the majority of the western market,” he told CNBC.
“People are getting older, they drink less. The so called millennial generation, which most market theorists had put all their hopes on, are finding serious problems with finding a job or having a disposable income to spend.”
Malandrakis said the craft-brewing industry is currently one of the greatest winners in the western market, but doesn’t believe the major beer brewers will seek to acquire these brands in the short term and will opt for further exploration into emerging markets.